Could Disney dump ESPN? Reports say the entertainment giant is considering a split. According to Puck's Dylan Byers, “There are now conversations happening regularly at Disney about whether or not to spin off ESPN.”
This isn’t to say that Disney would necessarily sell the network, but it might create a standalone company. While ESPN is a valuable property — some might call it the crown jewel of sports broadcasting — it’s also locked in an ever-more-expensive battle for sports rights. There are only so many sports to go around, and they’re just about the only television programs that are viewed live by a large segment of the audience. That makes them more attractive to advertisers getting squeezed out by commercial-free streaming options. But even that advantage may be slipping as surveys show younger viewers prefer watching highlights or the ends of games, rather than the whole contests.
A standalone ESPN might be freer to go all-in on gambling products. That kind of vice doesn’t jive with Disney’s family-friendly product line. But ESPN has been inching in that direction for a few years. In 2019, Disney signed a deal with Caesars Entertainment to build an ESPN-branded studio at The Linq Hotel in Las Vegas to create sports betting-related content.
But if Disney keeps the sports network, it has something Netflix doesn’t. It also gets to extract value from cable companies and streaming services that carry ESPN. Because of the sports rights, ESPN is a wildly expensive channel in any cable/streaming package, but carriers are reluctant to cut it because Disney can use the weight of its other networks (ABC, Disney Channel, FX) as leverage.
Disney acquired a majority stake in ESPN in 1996, but the company has struggled to figure out its role within its brand. In 1998, Disney launched the ESPN Zone concept, which was a combination sports restaurant/bar and arcade. Locations stretched from Baltimore to Los Angeles, but they began folding in 2009. The last ESPN Zone closed in 2018 - the same year Disney launched ESPN+.
A source with Disney pushed back on this report, telling CNBC the company is focused on building the value of ESPN+ with its digital bundle.
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